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Does work pay in Slovenia?

  • Primoz Dolenc

    (Primorska University, Faculty for Management, Koper Ministry of Finance, Ljubljana)

  • Milan Vodopivec

    (Primorska University, Faculty for Management, Koper World Bank, Washington D.C.)

Income transfers may generate work disincentives: if certain income payments are stopped when individuals (re)enter employment, this creates disincentives for taking employment – so called “unemployment trap”. To make work pay, several countries have introduced policies – financial incentives – which enhance employment opportunities for marginal groups in the labor market. Such policies increase in-work incomes and so improve work incentives for those receiving only out-of-work incomes. This paper tries to shed light on two questions, first being how does “making work pay” work in Slovenia, compared OECD countries, and the second, should Slovenia introduce earnings supplements or other in-work arrangements in tackling possible unemployment trap. According to international comparison Slovenia does not “step-out”, when we look at net replacement rates. Slovenia, however, has not introduced a single active labor programs that would stimulate directly and financially unemployed to join (official) employment, even though a lower paid job. In the paper we suggest the implementation of some kind of in-work arrangement at least for those, who are potentially less stimulated to reemploy.

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Article provided by Institute of Public Finance in its journal Financial Theory and Practice.

Volume (Year): 29 (2005)
Issue (Month): 4 ()
Pages: 341-362

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Handle: RePEc:ipf:finteo:v:29:y:2005:i:4:p:341-362
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  1. Giuseppe Carone & Herwig Immervoll & Dominique Paturot & Aino Salomäki, 2004. "Indicators of Unemployment and Low-Wage Traps: Marginal Effective Tax Rates on Employment Incomes," OECD Social, Employment and Migration Working Papers 18, OECD Publishing.
  2. Robert Haveman, 1995. "Reducing Poverty while Increasing Employment: A Primer on Alternative Strategies, and a Blueprint," OECD Jobs Study Working Papers 7, OECD Publishing.
  3. Immervoll, Herwig & O'Donoghue, Cathal, 2003. "Employment transitions in 13 European countries: levels, distributions and determining factors of net replacement rates," EUROMOD Working Papers EM3/03, EUROMOD at the Institute for Social and Economic Research.
  4. David Card & Philip K. Robins, 1996. "Do Financial Incentives Encourage Welfare Recipients to Work? Evidence from a Randomized Evaluation of the Self-Sufficiency Project," NBER Working Papers 5701, National Bureau of Economic Research, Inc.
  5. Giuseppe Carone & Aino Salom�ki & Herwig Immervoll & Dominique Paturot, 2003. "Indicators of unemployment and low-wage traps (marginal effective tax rates on labour)," European Economy - Economic Papers 197, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
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